Every benefit has a cost, and this is often borne by those who are least able to bear it

Recently my native country was mired in yet another food related scandal. Meat had been repackaged and relabelled to conceal that it was way beyond its expiry date, and was exported to Kosovo. A slaughterhouse is suspected of processing meat unfit for human consumption and selling non-organic meat as organic. The Food Standards Agency was accused of being slow to act on reports of these irregularities. The good news is that apparently nobody was ever at risk of eating rotten meat, and supermarkets immediately stopped the supplies from any suspect supplier. The bad news is that this was another blow to the general public’s trust in the food chain.

The perfect climate for consumer activists to grab the initiative. A group of organizations including the Consumer Union and Fairtrade Belgium have joined forces under the header “I am more than my till receipt”. They want the supermarkets to treat their customers not just as a source of money at the checkouts. In particular, they would like retailers to educate the consumer, spokesperson Ingrid Renders said in a radio interview, “we want to be able to trust the food chain once again.”

One of their recruiting slogans is “Would you too like supermarkets to make sustainable food the easiest choice?” An almost perfect instance of Richard Thaler’s summary of nudging: make it easy.

Inevitable trade-offs

But this involves trade-offs. The more animal-friendly and sustainable the livestock production, the more expensive the eventual produce. And if you want, in Ms Renders’ words, “the best buy, not the lowest price, but the most honest low price”, that would mean more expensive meat.

This is fine for people who share this persuasion, and who are able and prepared to pay more for products that are – by some definition – more sustainable. But not everybody is willing, or indeed able to spend more on food, said Peter Heirman from the Network against Poverty, also in a radio interview. Some households have a food budget of just 50-70 euros (£45-60, $60-85) per week. For them, the difference between the lowest price and low, honest prices will be the difference between meat on the table and no meat on the table.

As long as cheap and premium produce are available alongside each other, this should not be a problem. But if the supermarkets find that a majority of customers have a preference for more expensive, sustainable produce, they may decide to drop the inexpensive option because the low demand makes it uneconomical. Low-income families would thus be priced out of the market for meat.

Cash is not the only barrier though. Mr Heirman also spoke of the social pressure that people on low budgets are experiencing when they choose the cheapest, non-sustainable option out of necessity. Either way, it is people who struggle to make ends meet who risk ending up worse off.

Good intentions

The intentions of the advocates of sustainable produce that is easier to buy are undoubtedly sincere. But what looked like a benign nudge – an encouragement to opt for a different choice, that enhances people’s welfare without any material cost – turns out to put the welfare of the most vulnerable people at risk.

Reducing choice almost always makes losers: anyone whose optimum trade-off is removed will be worse off. This is even more starkly the case when it is mandated regulation that prevents particular choices from being offered by the market, for example for reasons of safety, health or hygiene.

Behavioural and conventional economics come together here. Proponents of more sustainable produce for everyone may overlook the fact that not everybody shares their willingness to pay more for premium food (this is known as the false consensus effect: the belief that one’s own values are typical and widespread). They may also lack contact with low-income families, and so be unaware that some people may be unable to afford the new norm – an instance of WYSIATI (what you see is all there is – see this previous article.

Regulators too don’t always consider the fundamental economics of new constraints. Every benefit has a cost, and it is not always obvious who will be paying it. The bill of better animal standards and sustainable farming methods may look like it ends up with the farmers and breeders. But it is ultimately the end of the food chain that will eventually bear the cost. The buck almost always literally stops with the consumer.

The cost of freedom

The authors of Nudge refer to nudging as a form of “libertarian paternalism” – leaving people free to choose, while paternalistically steering them in the direction of the ‘best’ option. Not everyone likes this form of surreptitious patronizing, but it is rather innocent in comparison with regulation, a far more forceful way for the government to express that they know best.

Regulations and laws inevitably reduce choice and take away people’s freedom to make the trade-offs that correspond with their preferences. Sacrifices of freedom should not be made lightly. Long before Nudge, Cass Sunstein was already intensely promoting the use of systematic and comprehensive cost-benefit analysis in the formulation of laws and regulation, precisely for this reason.

It would be good if regulators, law makers and campaigners alike would heed his advice, and carefully consider the full effect of the societal trade-offs they advocate. For the true cost of a loss of freedom is often borne by those who can least afford to do so.